Global firms and wages: is there a rent sharing channel?

In this paper we explore the extent to which firms engaged in international trade and FDI activities share profits. We allow for differences not only between domestic and foreign owned firms, but also between firms with outward FDI, importers and exporters. We argue that firms engaged in international trade enhance their performance through knowledge spillovers and technology upgrading – similar to what happens to companies that are part of multinational groups – and that this superior performance can translate into substantial wage premia to workers. Using a unique dataset for Slovenian firms for the period 1994-2002, we confirm positive profit-sharing for foreign firms, firms that engage in outward FDI and two-way traders, but not for firms that only import or export.